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Week 2 C. Laux

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Strategic Model Strategy Goals Processes Projects ISO-based QMS Set Standards Strategic Areas for Improvement Lean Thinking Quick Wins Kaizen

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Data and Facts Practical Problem Statistical Problem Statistical Solution Practical Solution

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Eight-five percent of the reasons for failure to meet customer expectations are related to deficiencies in systems and processrather than the employee. The role of management is To Change The Process rather than badgering individuals to do better W. Edwards Deming

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Summary This is not about sloganeering or bureaucracy or filling out forms. It finally gives us a route to get to the control function, the hardest thing to do in a corporation. -Jack Welch Former CEO of General Electric

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Questions?

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Outline What is Six Sigma The Six Sigma Organization Leadership and Six Sigma

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What is new about 6 Sigma? Reliance on tried and true methods with decades use: SPC Project management DOE __________ Is Six Sigma more or less complex than other quality systems? (i.e. TQM, etc.) Has little to do with traditional quality: Quality: conformance to internal requirements

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TQM vs. Six Sigma TQM Defined A management approach to doing business that attempts to maximize an organizations competitiveness through continual improvement of the quality of its products, services, people, processes, and environments Six Sigma Defined A methodology that provides businesses with the tools to improve the capability to their business processes. Compare

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What differentiates Six Sigma from TQM? Strategy The hard tie to business strategy and business results The required commitment of top leadership up front and continuously through years of implementation Each project delivers bottom line results in a relatively short time

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What is 6 Sigma? 12 A vehicle for strategic change... an organizational approach to performance excellence. TRANSFORMATIONAL CHANGE Across-the-board. Large-scale integration of fundamental changes throughout the organization --- processes, culture, and customers --- to achieve and sustain breakaway results. TRANSACTIONAL CHANGE Business processes. Tools and methodologies targeted at reducing variation and defects, and dramatically improving business results. Defining 6 Sigma

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6 Sigma characteristics: Relentless quest for perfection Data-driven, fact-based decision making Focusing our best people on our highest priorities Improve the processes Rigorous alignment of actions with strategy Measuring bottom-line impact Transforming how people work 13

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Mikel Harrys 6 Sigma Observations Selecting a tool is much like picking a spouse both make several assumptions. Black Belts are about ideas, quality engineers are about tools. There are key analytical ideas that every Black Belt should ponder and explore. If tools were the ticket, statisticians would be CEOs. A simple idea can often negate the need for a tool. The majority of a physicians curriculum is about knowledge, not scalpels. Six sigma is about the quality of business, not the business of quality

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What is sigma? 15 6 Sigma is also a measure of variability. It is a name given to indicate how much of the data falls within the customers requirements. The higher the process sigma, the more of the process outputs, products and services, meet customers requirements or, the fewer the defects. Sigma is the Greek letter that is a statistical unit of measurement used to define the standard deviation of a population. It measures the variability or spread of the data. Defining 6 Sigma

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16 Sigma vs. Cost of Poor Quality 30% 25% 20% 15% 10% 5% 69% 93.3% 99.4% 99.98% 99.9997% COPQ as a Percent of SALES 22 33 44 55 66 RTY (% DEFECT-FREE) * Derived from AlliedSignal internal study and experience

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93% v 99.9% levels Examples of a world at 3 Sigma 54,000 wrong drug prescriptions per year 40,500 new-born babies per year dropped at delivery Usage drinking water 2 hours a month 5 crash landings per day at the busiest airports 54,000 lost pieces of mail per hour Examples of a world at 6 Sigma 1 wrong prescription in 25 years 3 new-born babies dropped in 100 year Unsafe drinking water 1 second every 16 years 1 crash landing in 10 years 35 lost pieces of mail per year

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Potential Value With performance at 2 sigma: 69.146% of products and/or services meet customer requirements with 308,538 defects per million opportunities. With performance at 4 sigma: 99.379% of products and/or services meet customer requirements... but there are still 6,210 defects per million opportunities. With performance at 6 sigma: 99.99966% As close to flaw-free as a business can get, with just 3.4 failures per million opportunities (e.g., products, services or transactions). Waste = potential quality actual quality 18

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Three Levels of Benefits Allows for differentiation by: Nature of underlying benefit Confidence level in benefits achieved Provides latitude to drive behavior with quantifiable risk All Benefit Levels Are Important

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Material cost reduction Warranty reductions Cancel external lease Enterprise headcount reduction Incremental volume; price realization Freight /scrap reduction Finance benefit on working capital improvements Direct impact 90% confidence required Economic substance required NatureExamples Highest Confidence, Most Visible Level I Benefits

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Productive redeployment of existing resources Equipment, buildings, etc. Whole persons Person productively redeployed in support of enterprise growth Equipment productively redeployed to a different plant/process thereby avoiding capital spend or outsourcing of operation Examples Nature Level II Redeployments Support Efficient Growth Level II Benefits

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Avoidances Benefits otherwise Level I except for confidence achieved: Level I requires 90% Level III requires 70% Benefits measured on an NPV basis Partial people efficiencies Whole people made available for redeployment Cost or capital avoidance Projects with significant upfront investments Incremental volume with 70% confidence Efficiency gains resulting in manpower made available for redeployment Salaried/mgmt. efficiencies partial person NatureExamples Level III Critical to Growth and Quality Level III Benefits

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Why Measure the Financial Impact? Drives bottom line focus Forces value-added mindset of projects Ensures financial benefits from improvements are real Facilitates filtering and prioritization of projects What gets measuredgets done!

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Fiscal Benefits - Summary Six Sigma must pay its way with quantifiable measures that trace savings to the bottom line. Level 1 Direct Fiscal Benefits Level 2 Re-deployment of personnel Level 3 Opportunities for Future Benefits Six Sigma must be fiscally self sustaining

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Potential* Value Extraction Cost of Poor Quality is reduced via assignment of Black Belt Project Teams to Improvement Projects: Seasoned Black Belts complete three to four projects annually $175,000 - $200,000 average savings per project Annual savings delivered per Black Belt $575,000 - $800,000 Guidelines for number of Black Belts: 1% - 3% of employees 25 Cost of Poor Quality

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Six Sigma Philosophy 26 Application of Scientific Method to design and operation of management systems and business processes to enable delivery of greatest value to customers and stakeholders Aligning core business processes with Customer and Business Requirements Systematically eliminating defects from existing processes, products, services, or plants Designing new processes, products, services, or plants that reliably and consistently meet Customer and Business Requirements Implementing the infrastructure and leadership systems to sustain gains and foster continuous improvement

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Market Inputs Business Processes Suppliers Critical Customer Requirements Process Outputs Defects Variation in the Process Output causes Defects that are seen by the customer Output Variation is caused by Variation in Process Inputs and by Variation in the Process itself 6 Sigma Focuses on the Reduction of Variation that Generates Defects for Customers

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Fig. 3-8

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Reducing the Process Output Variation Defects: Service unacceptable to customer Mean Variation Product or Service Output Critical Customer Requirement

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Moving the Mean Product or Service Output Critical Customer Requirement Defects: Service unacceptable to customer Mean

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The Funneling Effect Critical Input Variables 59 Inputs 8 3 2 Found Critical Xs Controlling Critical Xs 17 All Xs 1st Hit List Screened List MEASURE ANALYZE IMPROVE CONTROL Process Maps Failure Modes and Effects Analysis/FTA Multi-Vari Studies Design of Experiments (DOE) Control Plans C&E Matrix

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Application PlanDoStudyAct PlanStudy

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33 6 Sigma Definitions

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Establishing these factors provides the seeds of success. They need to be integrated consistently to fit each business. They are all necessary for the best result. The most powerful success factor is committed leadership. Committed Leadership Business Process Framework Customer & Market Network Strategy Integration Full Time 6 Sigma Team Leaders Incentives & Accountability Quantifiable Measures & Results General 6 Sigma Critical Success Factors

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Strategy Defined The fundamental decisions and actions that guide an organization is, what it does, why it does it, with a focus on the future Strategic Planning is a disciplined effort to accomplish all these things Corporation: a collection of individuals that together, produce something that has less transaction cost than individually

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Implementing Six Sigma: 3 Basic On-Ramps Business Transformation Pros: rapid change, significant improvements in a few months Cons: chaotic, challenging to muster the time and people needed to meet the demands Strategic Improvement Pros: helps to focus on higher-priority opportunities, limits the challenges Cons: people feel left out in the process, uncertainty on how to align parts of the company that are doing Six Sigma with those that arent Problem Solving Pros: less disruptive, gives the company a chance to get a feel for how it works Cons: doesnt fix underlying problems or take a broad view of making change successful

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Leadership Champion the process by understanding 6 Sigma and committed to success Guidance through creating vision by drawing mental images of future Visions embody abstract values; convert the abstractions

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Visioning Stories are another way to communicate abstract ideas Event(s) occur that capture the essence of leaders vision May create situation with powerful symbolic meaning and use to communicate vision serves purpose for clarity